Catskill Development v. Park Place Entertainment

• Decision Date: 21 October 2008
• Docket Number: Docket No. 06-5860-cv.
• Citation: 547 F.3d 115
• Parties: CATSKILL DEVELOPMENT, L.L.C., Mohawk Management, L.L.C., Monticello Raceway Development Company, L.L.C., Catskill Litigation Trust, Plaintiffs-Appellants, Paul Debary, Joseph Bernstein, Consolidated-Plaintiffs-Appellants, v. PARK PLACE ENTERTAINMENT CORPORATION, Defendant-Appellee, Harrah's Operating Company, Inc., Consolidated-Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

547 F.3d 115

CATSKILL DEVELOPMENT, L.L.C., Mohawk Management, L.L.C., Monticello Raceway Development Company, L.L.C., Catskill Litigation Trust, Plaintiffs-Appellants, Paul Debary, Joseph Bernstein, Consolidated-Plaintiffs-Appellants, v. PARK PLACE ENTERTAINMENT CORPORATION, Defendant-Appellee, Harrah's Operating Company, Inc., Consolidated-Defendant-Appellee.

Docket No. 06-5860-cv.

United States Court of Appeals, Second Circuit.

Argued: May 12, 2008.

Decided: October 21, 2008.

Sanford I. Weisburst, Quinn Emanuel Urquhart Oliver & Hedges, LLP (Andrew L. Frey, Mayer, Brown, Rowe, & Maw LLP, John P. Gallagher, Troutman Sanders LLP, on the brief) for Plaintiffs-Appellants.

George F. Carpinello, Boies, Schiller, & Flexner LLP (Martin Deptula, Teresa Monroe, Paul R. Verkuil, on the brief) for Defendants-Appellees.

Before: NEWMAN, WALKER, and SOTOMAYOR, Circuit Judges.

SOTOMAYOR, Circuit Judge:

These consolidated cases involve a dispute between a group of entities vying for the right to develop a casino in the Catskills with the non-party Mohawk Indian Tribe ("the Tribe"). As explained further below, plaintiffs-appellants Catskill Development, L.L.C. ("Catskill"), Mohawk Management, L.L.C. ("Mohawk"), and Monticello Raceway Development Company, L.L.C. ("Monticello"), and consolidated-plaintiffs-appellants Paul DeBary and Joseph Bernstein (collectively, the "Catskill Group"),¹ claim that defendant-appellee Park Place Entertainment Corporation ("Park Place")² tortiously interfered with the Catskill Group's contractual and business relations with the Tribe, when Park Place entered into an exclusive agreement with the Tribe to develop a casino. We affirm the district court's dismissal of the Catskill Group's interference with contract claim on the ground that the Catskill Group's contracts with the Tribe were void and otherwise unenforceable at the time of the alleged interference. We affirm the district court's grant of summary judgment to Park Place on the Catskill Group's interference with business relations claim on the ground that the Catskill Group failed to establish a triable issue of fact that Park Place used wrongful means to interfere.³

BACKGROUND

A. Regulatory Framework

In 1988, Congress enacted the Indian Gaming Regulatory Act ("IGRA"), 25 U.S.C. §§ 2701-2721 (2006), which provides a detailed regulatory framework for Indian gaming.⁴ Congress's express purpose in passing IGRA was, inter alia, to "promot[e] tribal economic development, self-sufficiency, and strong tribal governments," while simultaneously "shield[ing tribes] from organized crime and other corrupting influences [and] ensur[ing] that ... Indian tribe [s are] the primary beneficiar[ies] of ... gaming operation[s]." Id. § 2702.

To conduct gaming, an Indian tribe must satisfy numerous prerequisites. As relevant to this case, the gaming must take place "on Indian lands ... located within a State that permits such gaming." Id. § 27 10(b)(1)(A). IGRA generally prohibits gaming on lands that became Indian lands subsequent to IGRA's enactment in October 1988, unless the Governor of the relevant State "concurs" with a determination by the Secretary of the Interior that it "would be in the best interest of the Indian tribe and its members, and would not be detrimental to the surrounding community." Id. § 2719(b)(1)(A).

Moreover, IGRA provides for federal oversight of contracts between tribes and non-tribal entities regarding the management of tribal gaming operations. Id. § § 2710(d)(9), 2711(g). Tribes may enter into contracts for the management of these gaming operations only with the approval of the National Indian Gaming Commission ("NIGC") Chairman. Id. § 2711(a)(1).⁵ By regulation, unapproved management contracts are deemed "void." 25 C.F.R. § 533.7 (2008).

B. Factual Background

In 1996, the Catskill Group entered into a series of contracts with the Tribe⁶ for the purpose of building and operating a casino at a site adjacent to the Monticello Raceway. Three of those contracts are at issue here:

• A Land Purchase Agreement ("LPA") between the Tribe and Catskill, which, inter alia, provided for Catskill's transfer of 29 acres of land to the United States to be held in trust for the Tribe;

• A Management Agreement ("MA") between the Tribe and Mohawk, which, inter alia, detailed the duties and responsibilities of Mohawk, and the fees for its management services; and

• A Development and Construction Agreement ("DCA") between the Tribe and Monticello, which, inter alia, provided for the construction and development of the casino and surrounding lands.

All of these agreements, in some manner, required the Tribe to use its best efforts and to cooperate with the Catskill Group in obtaining the requisite government approvals.⁷ However, despite having spent millions of dollars, the Catskill Group still had not received all the necessary state and federal approvals by April 2000, and the NIGC had denied the Catskill Group's application several times. Although the United States Bureau of Indian Affairs (the "BIA") had agreed to take the land at issue in trust for the Tribe, final approval was never provided because the New York Governor had not yet consented to the transfer, and the BIA had not made a final determination that the price ($10 million) to be paid by the Tribe for the land transfer did not exceed the land's fair market value.

Meanwhile, in mid-1999, Park Place sought an introduction to the Tribe through Ivan Kaufman, CEO of Presidents Resorts Casino, Inc. ("Presidents"), and Gary Melius, a real-estate developer, each of whom had pre-existing relationships with the Tribe. According to the Catskill Group, Park Place falsely represented to Kaufman that it would reward his efforts of favorably introducing Park Place to the Tribe by buying out his substantial investment in, and taking over the management of, the Tribe's struggling Akwesasne casino. Park Place also allegedly offered to Melius millions of dollars for an introduction to the Tribe, to be paid upon Park Place's acquisition of the Akwesasne management contract or upon Park Place's securement of an agreement with the Tribe regarding gaming operations in the Catskills/Monticello area. However, after Kaufman and Melius introduced Park Place to the Tribe, Park Place allegedly disavowed the agreements it had reached with those individuals.⁸

The Catskill Group alleges that during the ensuing negotiations between Park Place and the Tribe, Park Place misrepresented to the Tribe, inter alia, that the federal approval granted to Catskill to take land into trust for purposes of gaming was "portable," and that a casino project on another site would be approved within four months. Finally, and as described further below, Park Place also allegedly concocted, participated in, and acquiesced in a scheme with Kaufman to place a financial "squeeze" on the Tribe by slowing the Akwesasne casino's payroll, with the hope and intent that the Tribe would turn to Park Place for a financial bailout.

On April 14, 2000, the Tribe entered into a written agreement with Park Place, which set forth "certain understandings" reached between the parties: namely, that (1) Park Place would be the exclusive developer and manager of any Tribe casinos in New York (with certain exceptions not pertinent here); (2) Park Place and the Tribe would have a profit distribution of 70% to the Tribe and 30% to Park Place after the Tribe paid back Park Place for "advances" for the cost of development and construction; (3) Park Place would begin construction of a casino within 36 months unless otherwise agreed by the parties; (4) Park Place would pay the Tribe $3 million "for use by the Tribe in it's [sic] discretion," and which "shall be paid back to [Park Place] only in the event that the Tribe does not or is unable to enter into [certain] development, management and licensing agreements [with Park Place]"; and (5) Park Place would indemnify the Tribe from litigation losses resulting from the Tribe's termination of its agreements with the Catskill Group.

Shortly after Park Place and the Tribe entered into this agreement, the Tribe and the Catskill Group ceased discussions with respect to the Monticello Raceway project.

C. Procedural History

Catskill, Mohawk, and Monticello (i.e., the Catskill Group) commenced suit in November 2000 alleging, inter alia, that Park Place tortiously interfered with the Catskill Group's contractual relations with the Tribe ("Count I," or the "interference with contract claim"). In the alternative, the Catskill Group alleged that Park Place had tortiously interfered with its business relationships with the Tribe ("Count II," or the "interference with business relations claim").⁹

Upon Park Place's motion, the district court dismissed Count I on the grounds that none of the contracts at issue was enforceable in the absence of NIGC approval. Catskill Dev., LLC v. Park Place Entm't Corp., 144 F.Supp.2d 215, 232-34 (S.D.N.Y.2001) ("Catskill I"). The district court, however, permitted Count II to proceed on the ground that there was a question of fact regarding whether the Catskill Group's losses stemmed directly from Park Place's actions. Id. at 238-39.

The Catskill Group moved for reconsideration, arguing, inter alia, that one of the contracts at issue—the LPA in particular—was enforceable without NIGC approval. The district court agreed and reinstated the interference with contract claim with respect to the LPA only. Catskill Dev., LLC v. Park Place Entm't Corp., 154 F.Supp.2d 696, 703-05 (S.D.N.Y.2001) ("Catskill II").

Park Place then moved the district court for reconsideration of that decision. While its reconsideration motion was pending, Park Place also moved for summary judgment on the remaining claims for tortious interference with business relations. The district court granted Park Place's motion for summary judgment, thus disposing of the entire case. Catskill Dev., LLC v....